How to buy and sell a house at the same time

It’s hard to do move-up or contingency deals, but not impossible

CHICAGO (MarketWatch) — Affordable home prices and low interest rates have lured investors and first-time home buyers into the housing market, but move-up buyers are a tougher sell.

Many homeowners are simply stuck in their current homes because of an underwater mortgage. Others are concerned about the timing of transactions so they can seamlessly move from one home to another — at a time when houses typically spend more days on market and thorough mortgage underwriting can make for unpredictable closing schedules.

SPRING REAL ESTATE
Spring thaw?
Encouraging reports on the housing market are stirring up optimism
about this year’s home buying and selling season.
•

Competition starts to grow
The housing market still favors the buyer, but signs point to it slowly
emerging from the doldrums. In many areas, buyers can no longer count on
rock-bottom deals.

In fact, some say that when move-up buyers return en masse, that will be a sign of a healthy market: “To me, one of the bigger indicators of the market stabilizing is the realization of people that they can buy a home and sell a home,” said Steve Berkowitz, chief executive of Realtor.com.

All that said, sometimes people simply must move. Their family expands and they outgrow their space. They get married. They relocate for a job. Life goes on.

Thankfully, it’s not impossible to make a double-sided transaction work these days, especially in markets that are showing some signs of bouncing back, in terms of sales and prices.

“We are seeing sellers realizing that even though they might not be able to get as much money for their property as they hoped … they’re able to get so much house for their money now, they’re able to balance that and it makes sense for them,” said Jessica Edwards, consumer specialist for Coldwell Banker Real Estate, and a real-estate agent based in Wilmington, N.C.

That’s exactly what happened for her clients, Susan and Adam Webb, who set out late last year to move into a home that would accommodate plans to expand their family.

They took a hit on the sale of their Wilmington home bought only four years ago, but were able to buy another home with a low-down payment Federal Housing Administration-insured mortgage. The Webbs had a contract on their existing home 60 days after they listed it, and were able to move directly from one home into the other.

“Realistically, we were in no rush to sell the house. We were expecting [to have it on the market] for six-plus months,” Susan Webb said. They listed the home the week before Christmas, and while there were no showings for the first three weeks, a string of interested buyers started walking through after the holidays. “We ended up getting a couple of offers in one weekend,” she said.

Of course, a move like this takes careful planning.

In struggling housing markets, some home sellers won’t allow a contingency on the contract that states you need to sell your home before you will complete the purchase. Plus, don’t count on getting a bridge loan, a temporary loan that allows a buyer access to the cash needed to make a down payment on a home while their equity is still tied up in their former place. Many banks aren’t making those loans these days.

Those interested in swapping their existing home for another this year should consider some of the steps Susan and Adam Webb took to make it happen for them. Below are several.

Learn the market

Early on, you’ll want to interview real-estate agents and understand what your home will realistically sell for. If you don’t have the equity to sell your existing home and come up with a down payment on another home, your process may stop right then and there.

After making the decision to follow through, educate yourself on the market. The Webbs, for example, searched for a home for three months before their existing home went under contract. That helped them stay aware of what was on the market so that when it was time to get more aggressive and put in an offer to buy, it didn’t feel like it was a quick decision, Susan Webb said.

“Before [sellers] put the property on the market, they should go out there and see what their money can buy,” said Jacky Teplitzky, managing director of Prudential Douglas Elliman in New York. The process of buying a new home and selling your old one should be happening simultaneously.

Just don’t get too attached to homes that catch your eye until you have a contract for the sale of your existing home.

“Go look until the cows come home, just don’t fall in love yet,” said Paul Purcell, co-founder of Rutenberg Realty in New York. Priority No. 1 is locking in a buyer for your current home, he said.

See the competition, and outshine it

A big challenge of selling a home is making sure it’s always ready to show. Whenever a potential buyer visits, the house should look better than any other property in the price range.

“If I’m a good businessman, I’m going to look at what the competition is like — everything that my potential buyer is going to be seeing,” Purcell said. Once you’ve done that, get your home ready to compete.

That doesn’t have to mean spending a lot of money, either. A little sweat equity and a willingness to maintain a show-ready home will do.

Keep the counters and sinks clean, de-clutter, tidy up the closets, keep windows clean, have the beds always made, keep the place free of odors and keep the lawn trimmed, he said. A fresh coat of paint doesn’t cost much yet can make a huge difference in brightening up interiors.

“Make it as beautiful as you can on your budget,” he said.

Price competitively

Sellers are more willing to price their homes more competitively these days, according to 600 Coldwell Banker real-estate professionals surveyed in a recent poll. Fifty-one percent said sellers are more willing to price their homes more competitively this year compared with last year.

If you can do it, Purcell advises pricing a bit below the market to catch people’s attention. Pricing competitively from the start will entice buyers early on and increase the likelihood it won’t languish on the market, he said. There’s always a ready pool of buyers who have been watching the market and know a well-priced property when they see it.

Competitive pricing helped the Webbs get a contract in short order.

“We went into it aggressively, rather than sit around and waste time,” Susan Webb said. Along with keeping it always ready to show, the list price “had a lot to do with it selling quickly.”

If you don’t find a new home in time, consider alternatives

Once you have a contract on your existing home and have found another you’d like to buy, good communication between all parties is essential to timing the transactions, allowing for a seamless move from one to another.

But it’s not the end of the world if you don’t find a home in time.

“If you put the house on the market and it sells faster… you’re better off temporarily living somewhere for a couple of months,” as opposed to settling for a home you’re not in love with, Edwards said. You’re also not going to miss out on market opportunities by waiting, since forecasts indicate housing markets are likely to remain affordable a year from now.

If renting is a possibility, make sure you do some research on what you can afford in the rental market. Some homeowners haven’t been renters for a decade or more, and may be quite surprised about the going rent prices in this market, Teplitzky said. Read more: How to win the battle for an apartment.

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